Mumbai, 12 Feb (Commoditiescontrol): Cotton prices surged during the week ended Feb 8th, as the complex tried to negotiate tighter balance sheet through curtailed demand. The complex replicated trend in previous few weeks of gains as supply-side constrains played out positively even as demand concerns persisted.
ICE cotton futures rallied to their highest levels since October 2022 on Friday, led by by buying frenzy after WASDE report alongside rally in oil prices and equity markets.
The monthly World Agricultural Supply and Demand Estimate (WASDE) update showed a 150,000 bale lighter U.S. domestic cotton use, now at 1.75 million bales. Exports, however, were raised by 200,000 bales to offset. On net ending stocks tightened by 100,000 to 2.8 million in the report.
ICE Cotton contracts for Mar closed at 91.78 cents, 268 points higher. May settled at 92.22 cents, adding 254 points. Jul ended 230 point strong at 92.22 cents.
Old crop cotton rallied triple digits to close out the week. March’s 268 point gain on the day left the contract a net 467 points or 5.36% higher for the week. Dec cotton closed 28 points in the black on Friday with a net weekly gain of 130 points.
Cotton complex also gained support from strong crude oil prices. Oil prices gained ground as investors considered the impact of Israel's rejection of a ceasefire offer from Hamas and unexpected drops in U.S. fuel stocks. Higher oil prices make polyester, a cotton substitute expensive.
It was generally very supportive for prices to see just a strong pace of shipments and (Export)sales continuing even though it wasn't quite on pace as last week, a dealer said.
Strong demand conditions, even as Chinese economy continuing to limp, surprised traders and forced them to cover up short positions.
Improvement in demand situation reflected in recent export data released by the U.S. department of Agriculture (USDA). The federal agency weekly sales report showed net sales for 2023/2024 of 349,400 running bales, up 69% from last week, while exports climbed to another marketing-year high of 396,700 bales. Weekly shipments had stayed above 200,000 bales in five of the previous six reports. Total old crop commitments sit at 9.86m RBs, which remains 4.3% ahead of last year’s pace.
The data points to "very good sales again in a long line of good sales for three months ... and finally, the shipments have caught up," said a trader.
Census data confirmed cotton exports were 1.106m bales in December. That was a 3-yr high for the month and was a MY high for the season. The season’s total was up to 3.746 million bales through Dec.
Cotton Ginnings data from NASS had the season’s total at 11.75 million running bales through Feb 1. That is still 15% behind last year’s pace, as the slowest ginning pace since 09/10.
Weekly FAS data showed 284,000 RBs of cotton were booked during the week that ended Feb 1. That was down from the 349,000 RBs sold the week prior but was an 8% increase from the same week last year. Cotton exports were also down for the week, with 249,000 RBs shipped, but were up 18% from the same week last year. USDA had cotton commitments 4.4% ahead of last year’s pace with 10.15m RBs on the books.
The Cotlook A Index shot up another 85 points for Feb 8, now listed at 96.85 cents/lb. The AWP increased 2.4 cents to 70.04 cents/lb in the weekly FSA update. ICE certified stocks were only 999 bales as of Feb 6.
The weekly Commitment of Traders report showed managed money cotton traders dropped 6,000 existing shorts and added 11,600 new longs during the week that ended Feb 6. That raised their net long to 46,344 contracts. Commercial cotton hedgers added 17,500 short hedges for a 90,540 contract net short.
The Chinese cotton market on the Zhengzhou commodity exchange will be closed from Feb 12th through Feb 15th for the Lunar New Year.
Cotton prices have managed to break the shackles of poor demand and analysts expectations. There was a skepticism about the U.S. cotton prices gaining traction this year as impact of lesser output was neutralised by China buying cotton from Brazil and Australia.
Traders piling on their net long position in cotton futures indicates continuation of firm price trend for some more time.
For Monday, support for the March Cotton contract is at 90.17 cents and 88.11 cents, with resistance at 93.33 cents and 94.43 cents.
(By Commoditiescontrol Bureau: 09820130172)
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